Stopping inflation by inducing a recession
A) can only benefit the economy, because the price level will be reduced.
B) generates costs to society due to the recession.
C) will always outweigh the costs of the recession.
D) both A and C

Question

Quizplus · Accepted Answer

Inducing a recession to stop inflation may reduce the price level, but it also generates costs to society through higher unemployment, lower production, and decreased investement. The costs of the recession may outweigh the benefits of lower inflation. Therefore, choice B is the best answer.

Stopping Inflation by Inducing a Recession